Qwest: Tax Comcast Like a Telco in Utah

8/22/2008 8:00 PM Eastern

By: Linda Haugsted

Now that Utah's biggest cable operator, Comcast, is looking more like a telephone company, competitor Qwest Communications International is asking legislators and other regulators whether it should be taxed like one, too.

Qwest has asked the Utah State Tax Commission to consider whether Comcast should pay corporate taxes assessed by the state. In a filing June 27, Qwest asserted that the current tax scheme treats the two companies very differently, although they provide much the same product.

It's an argument very similar to that cable operators themselves raised when arguing before state legislators for tax levies on direct-broadcast satellite service. They argue that such a tax would equalize the cost burden on consumers for subscribing to what, in cable's view, is a similar service.

But in this case, it's cable that makes the “apples-to-oranges” argument. Qwest's phone service is circuit-switched voice delivered via copper wire, a product under the purview of state utility regulators. Cable's phone product uses an Internet-based delivery network that Utah does not regulate. That's why Comcast is taxed like a cable company, with county-by-county levies.

The tax-board filing is not the first time this issue has been raised. A bill before the legislature last year brought up the issue of revised corporate taxes, but didn't survive the legislative process.

At least two state senators believe the Legislature is the proper venue for this argument. Republican State Sen. Curtis Bramble, the majority leader; and Sen. Wayne Niederhauser, a Republican member of the senate's revenue and taxation committee, wrote a letter to the tax board earlier this month arguing that corporate taxation is a significant policy issue that should be addressed by lawmakers, not via an administrative action.

Other opponents of the change note there has not been research on the fiscal impact of a corporate tax change.

The Tax Commission has heard arguments on the issue but did not make a decision. The matter is on the agency's Aug. 28 agenda.